Hyderabad-based pharma major Dr Reddy’s Laboratories will buy Wockhardt Ltd’s branded generics business in India, Nepal, Sri Lanka, Bhutan and Maldives and its manufacturing plant at Baddi in Himachal Pradesh for around Rs 1,850 crore. Wockhardt is selling a part of the business because of its plans to ensure adequate liquidity. Dr Reddy’s is paying more than three times of the revenues that Wockhardt’s acquired business is generating.

In the due course, Wockhardt’s strategic plan is to shift from acute therapeutic areas to more chronic businesses like anti-diabetes, central nervous system and also into niche antibiotic portfolios.  The sell-off will fetch Wockhardt adequate liquidity for investing in growing business both in India and abroad.

The Wockhardt’s business, which is changing hands, is pegged around revenue of Rs 370 crore in the current financial year (2019-20) till December and around Rs 600 crore in 2018-19. In fact, in 2018-19, the divested portfolio constituted 28% of standalone revenue and 14% of the consolidated revenue.

Deal

The deal agreement comprises of portfolio of 62 brands in multiple therapy areas such as respiratory, neurology, dermatology, etc. Once the deal is done, Wockhardt will continue to run international operations in the United Kingdom, the United States, Ireland and in other countries through its step-down subsidiaries. The deal is likely to be finalised by the second quarter of next financial year.

The deal will definitely boost Dr Reddy’s presence in high-growth therapy areas with brands such as Practin, Zedex, Bro-zedex, etc. Wockhardt will also transfer to Dr Reddy’s sales and marketing teams related to these areas. The transaction is likely to be largely funded through internal accruals, except for some short-term funding to handle timing mismatch.

Edge for Dr Reddy’s Laboratories

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